The willingness to pay for education in developing countries

TLDR: Using a rigorous theoretical model of the demand for schooling and the principle of compensating variations, the authors found that rural Peruvian households are indeed willing to pay fees high enough to more than cover the operating costs of opening new secondary schools in their villages.

Abstract: In recent years, citing the low price elasticity of demand for schooling, some economists have advocated increasing school fees to raise revenue for educational improvements in developing countries. But elasticities alone are not enough - one must estimate the willingness to pay for schooling improvements to see whether higher fees are in fact desirable. Using a rigorous theoretical model of the demand for schooling and the principle of compensating variations, the authors calculate the willingness to pay for new secondary schools in rural Peru. They find that rural Peruvian households are indeed willing to pay fees high enough to more than cover the operating costs of opening new secondary schools in their villages. This is even true of the poorest quarter of the income distribution.